Collection of assets and payment of debts Flashcards
What is required for banks to process withdrawals?
Withdrawal forms must be completed
How should actual property be handled after collection?
It should be collected, stored, and safeguarded
How can investments be sold or transferred?
Via a financial advisor
What can land registered at the land registry be transferred into?
PR’s name or directly to a beneficiary
Where should money collected be paid into?
- PR’s bank account for client money or
- Law firm client account
What is the duty of Personal Representatives (PRs) regarding payment of debts?
To pay with due diligence and may be liable to creditors or beneficiaries if not
Can liability to creditors be limited?
No, it cannot be limited
When should pre-grant loans for IHT be paid?
As soon as possible to minimize interest payments - particularly important if PRs have given a ‘first proceedings’ undertaking
What should be paid besides pre-grant loans?
General administration expenses (probate fees, costs of valuation)
What can be used to pay debts and liabilities?
All of the deceased’s property
What defines a solvent estate?
If assets are sufficient to pay all expenses, debts, and liabilities
What defines an insolvent estate?
If assets are insufficient to pay all debts and liabilities
How are secured debts handled?
Charged property bears primary liability unless a contrary intention is shown in the will
Secured debts means that they were charged during the deceased’s lifetime
How are unsecured debts and expenses repaid?
Assets are used in the statutory order, exhausted in full before moving to the next
What is the statutory order for repayment of unsecured debts/expenses?
- Property not disposed of by a will (subject to retention for pecuniary legacies)
- Residue
- Property the will sets aside for the repayment of debts
- Money in the pecuniary legacy fund
- Property specifically given
What is Contrary Intention in relation to unsecured debts?
Express wording in a will can override the statutory order.
How does Contrary Intention apply to secured debts?
Express wording can override the statutory order, but a contrary intention is not shown by a general direction for debts to be paid out of residue. A clear specific intention must be shown.
What is Marshalling?
If PRs take assets out of order, beneficiaries whose assets have been ‘wrongly taken’ can use the doctrine of marshalling.
- This allows the beneficiary to compensate themselves by going against the property which ought to have been used to pay the debts
- Creditors are not bound by the rules and are under no obligation to return money
What should PRs consider when choosing assets for sale?
PRs should consider:
- CGT implications
- how easily or quickly a sale can be carried out
- the wishes of beneficiaries.
What are the CGT implications of selling assets?
PRs are deemed to acquire assets at their market value on the date of death. They should consider selling assets which have not risen in value and sell rapidly depreciating assets quickly. Assets that have risen in value should be transferred directly to a beneficiary to avoid CGT charge.
Which assets can be sold quickly?
Quoted shares and financial investment products can usually be sold pretty quickly.
Which assets usually take longer to sell?
Land, business interests, and unquoted shares will usually take longer.
What should PRs do regarding the wishes of beneficiaries?
If a beneficiary wants to receive a particular item as part of their inheritance (and there is no legal objection), the PRs ought to respect these wishes and avoid selling the item where possible, but they are not legally bound to do so.
